This Annual Report on Form
10-K, including without limitation, the sections entitled “Business,” “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of
historical fact, including without limitation, statements regarding future events and our future results, our current expectations, estimates,
forecasts and projections about our business, our results of operations, our future expenses and financing needs, the industry in which
we operate and the beliefs and assumptions of our management, may be deemed to be forward-looking statements. Without limiting the foregoing,
words such as “may,” “will,” “should,” “could,” “anticipate,” “believe,”
“expect,” “intend,” “plan,” “potential,” “continue,” “might,”
“anticipate,” “estimate,” “goal,” “project,” “strategy” and “future,”
and similar expressions are intended to identify these forward-looking statements. Examples of such forward-looking statements include
statements regarding:
These statements reflect
our current beliefs and are based on information currently available to us. Forward-looking statements involve significant risks and uncertainties,
including without limitation, those listed in the “Risk Factors” section. A number of factors could cause actual results to
differ materially from the results discussed in the forward-looking statements including, but not limited to, changes in general macroeconomic,
geopolitical and market conditions and the risk factors disclosed under “Risk Factors.” Although the forward-looking statements
contained in this report are based upon what we believe to be reasonable assumptions, we cannot assure you that actual results will be
consistent with these forward-looking statements. Investors should not place undue reliance on forward-looking statements. These forward-looking
statements are made as of the date hereof, and we assume no obligation to update or revise them to reflect new events or circumstances,
except as required by applicable law.
Item 1. Business
OVERVIEW
CohBar (“CohBar,” “we,” “us,” “our,”
“its” or the “Company”) is a clinical stage biotechnology company leveraging the power of the mitochondria and
the peptides encoded in its genome to develop potential breakthrough therapeutics targeting chronic and age-related diseases. Our novel
approach is built on the key insights of the Company’s founders that certain mitochondrially encoded peptides produce effects that
are not limited to local regulation within the mitochondria and may have important roles to play in critical systemic biological pathways.
Many of these effects are quite distinct from what has been thought of as energy production and metabolism, involving diverse
processes including inflammation, fibrosis and cell signaling.
Through our exploration of the mitochondrial genome and its utility
for the development of novel therapeutics, we have developed a world-renowned expertise in mitochondrial biology and a broad intellectual
property estate with 6 issued patents and approximately 30 pending patent applications. Our proprietary processes of identifying nucleic
acid sequences encoding native peptides in the mitochondrial genome, developing and optimizing novel analogs of these natural mitochondrial
derived peptides (“MDPs”), as well as developing and conducting proprietary screens to identify and characterize the activities
of these peptides are referred to as our technology platform. We are exploring development and/or partnership opportunities within the
Company’s peptide library and technology platform.
We believe that the proprietary
capabilities of our technology platform, combined with our scientific expertise and intellectual property portfolio, provide a competitive
advantage in our mission to treat chronic and age-related diseases through the advancement of a new class of transformative drugs. Our
peptide optimization process is designed to discover numerous potential drug candidate opportunities. These drug candidates may be internally
developed by CohBar or advanced through strategic partnerships with larger biopharmaceutical companies.
OUR PIPELINE
Our research efforts have historically been focused on utilizing our
technology platform to identify, assess and optimize novel analogs of native peptides found in the mitochondrial genome and advancing
those candidates with the greatest therapeutic and commercial potential.
CB4211
Our most advanced clinical candidate, CB4211, is a first-in-class therapeutic
for the treatment of nonalcoholic steatohepatitis (“NASH”) and obesity. CB4211 demonstrated positive effects on reducing biomarkers
of liver injury and improving metabolic homeostasis in a Phase 1a/1b clinical study in obese subjects with nonalcoholic fatty liver disease
(“NAFLD”). CB4211 is a novel and improved analog of MOTS-c, a naturally occurring MDP. MOTS-c was discovered in 2012 by CohBar
founder Dr. Pinchas Cohen and his academic collaborators and has been shown to play a significant role in the regulation of metabolism
in animal models. Compared to other assets under development for the treatment of NASH, CB4211 has a unique mechanism of action, which
we believe offers a differentiated approach to treating NASH and obesity, as well as the potential to exhibit an enhanced safety profile
due to its natural origin. Furthermore, we believe the positive clinical data from our CB4211 trial is an important validation of our
overall approach to drug discovery, serving as a proof point that novel analogs of peptides encoded in the mitochondrial genome can impact
systemic biological pathways in humans.
In August 2021, we released positive topline data from our Phase 1a/1b
clinical study of CB4211. The Phase 1a stage of the study was designed to assess the safety, tolerability, and pharmacokinetics of CB4211
following single and multiple-ascending doses in healthy subjects. Subjects in the Phase 1a study experienced mild, but persistent injection
site reactions, which were generally seen as painless bumps at the injection site that can be felt under the skin. We modified the formulation
for CB4211 partway through the Phase 1a study and did not observe any persistent injection site bumps with the modified formulation. The
subsequent Phase 1b stage was designed to assess the safety, tolerability, and activity of CB4211 in obese subjects with NAFLD. The study
met its primary endpoint as CB4211 was well-tolerated and appeared safe with no serious adverse events. The evaluation of the exploratory
endpoints in the Phase 1b portion of the trial showed significant reductions from baseline in key biomarkers of liver damage, ALT and
AST, and in glucose levels in the CB4211 group compared to placebo after four weeks of treatment, with a trend towards lower body weight.
We do not believe that the
formulation of CB4211 used in the Phase 1b stage of the trial is suitable for further development. Efforts to develop an improved formulation
have not been successful to date and there can be no assurances that we will be able to develop such a formulation.
CB5138 Analogs
Our CB5138 Analogs are potential
first-in-class therapeutics that have demonstrated significant anti-fibrotic properties in a variety of preclinical models. Recent results
suggest that these effects may be mediated through impacts on the Wnt/Frizzled pathway, which is known to play an important role in fibrosis.
In 2021, we nominated CB5138-3 as our second clinical candidates based on its efficacy in mouse models of idiopathic pulmonary fibrosis;
however, in December 2022, we announced suspension of further Investigational New Drug (“IND”) enabling activities for this
peptide due to challenges in identifying a suitable formulation for clinical development. Any future development of other CB5138 Analogs
may face similar formulation challenges.
Recent Developments
We have retained Ladenburg
Thalmann & Co. Inc. as a financial advisor to assist the Company in exploring strategic alternatives. Potential strategic alternatives
that may be explored or evaluated as part of this process include a merger, business combination, investment into the Company, asset sale
or other strategic transaction. Our board of directors has not set a timetable for the conclusion of this review, nor has it made any
definitive decisions related to taking any further actions or potential strategic options at this time or at all. There can be no assurance
that this process will result in any such transaction and the Company does not intend to disclose additional details unless and until
it has entered into a specific transaction. See also “Risk Factors—Risks Related to Strategic Alternative Process and Potential
Strategic Transaction.”
EMPLOYEES AND HUMAN CAPITAL RESOURCES
As of December 31, 2022, we had ten employees, nine full-time and one
part-time. Additionally, from time to time we have engaged subject-matter experts on a consulting basis in specific areas of our research
and development efforts. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have
not experienced any work stoppages and we consider our relations with our employees to be good.
Our human capital resources
objectives include, as applicable, retaining and incentivizing our existing employees. The principal purposes of our equity incentive
plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation
awards and cash-based performance bonus awards.
RESEARCH AND DEVELOPMENT
Research and development activities have historically been central
to our business model. Our research programs have included activities related to discovery of novel MDPs, investigational research to
evaluate the potential therapeutic effects of certain discovered natural sequences in in vitro and preclinical studies, engineering novel,
improved analogs of certain discovered natural sequences with characteristics suitable for further development as potential drug candidates
and advancing our identified candidates through clinical studies. Depending on factors of capability, cost, efficiency and intellectual
property rights, we have conducted various aspects of our research programs either independently at our laboratory facility or under contractual
arrangements with third party contract research organizations (“CROs”).
INTELLECTUAL PROPERTY
Patents
Our commercial success depends
in part on our ability to obtain and maintain proprietary protection for our novel biological discoveries and therapeutic methods, to
operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. We seek to
protect our proprietary position by, among other methods, licensing and/or filing patent applications related to our proprietary technology,
inventions and improvements that are important to the development and implementation of our business.
Our intellectual property
and patent strategy is focused on our MDPs and our novel analogs of these natural peptides. Our strategy is generally to seek patent protection
in the United States and, where applicable, in those international jurisdictions we identify as holding significant potential market opportunity
for any drug we may develop and in which patent protection is available. We also rely on trade secrets, know-how, continuing technological
innovation and potential in-licensing opportunities to develop and maintain our proprietary position. With respect to new biologically
active MDPs that we identify within the mitochondrial genome, we typically file provisional patent applications and seek composition-of-matter
and method-of-treatment patents for our MDPs, and/or their novel analogs, and prospective novel drug candidates as well as methods of
use based on research and preclinical evaluation of therapeutic potential.
As of December 31, 2022, we are the owners of 6 issued patents and
approximately 30 pending patent applications, with claims predominantly directed to composition of matter and methods of use of novel
MDPs and their novel analogs. Our patent applications include filings in the United States, Europe and a number of other foreign countries,
with projected expiration dates ranging from 2037 to 2041. Additionally, we are the exclusive worldwide licensee from the Regents of the
University of California (the “Regents”) of 15 issued patents that will expire between 2028 and 2034. However, following the
termination of one of our licenses with the Regents on April 6, 2023, the Company will be exclusive licensee of 11 issued patents worldwide.
Terms for individual patents
extend for varying periods of time generally depending on the date of filing of the patent application and the legal term of patents in
the countries in which they are obtained. Generally, patents issued from applications filed in the United States are effective for twenty
years from the earliest non-provisional filing date. In addition, in certain instances, a patent term can be extended to recapture a portion
of the term effectively lost as a result of the FDA regulatory review period; however, the restoration period cannot be longer than five
years and the total patent term, including the restoration period, must not exceed fourteen years following FDA approval. The duration
of foreign patents varies in accordance with provisions of applicable local law, but typically is also twenty years from the earliest
international filing date. In certain instances, extension of patent term due to regulatory approval activities is available in foreign
countries.
National and international
patent laws concerning peptide therapeutics remain highly unsettled. Policies regarding the patent eligibility or breadth of claims allowed
in such patents are currently in flux in the United States and other countries. Changes in either the patent laws or in interpretations
of patent laws in the United States and other countries can diminish our ability to protect our inventions and enforce our intellectual
property rights. Accordingly, we cannot predict the breadth or enforceability of claims that may be granted in our patents or in third-party
patents. The biopharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights.
Our ability to maintain and solidify our proprietary position for our drugs and technology will depend on our success in obtaining effective
claims and enforcing those claims once granted. We do not know whether any of the patent applications that we may file or license from
third parties will result in the issuance of any patents. The issued patents that we own, license, or may license or own in the future,
may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not provide us with sufficient protection
or competitive advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop
and commercialize similar drugs or duplicate our technology, business model or strategy without infringing our patents. Because of the
extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our
drugs can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby
reducing any advantage of any such patent.
Trade Secrets
In addition to patents, we have relied upon unpatented trade secrets
and know-how to maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements
with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees. These agreements
are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of
technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not have adequate
remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the
extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others in their work
for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Trademarks
COHBAR® has
been registered by the United States Patent & Trademark Office.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Government Regulation
The preclinical studies and clinical testing, manufacture, labeling,
storage, record keeping, advertising, promotion, export, marketing and sales, among other things, of our therapeutic candidates and future
products, are subject to extensive regulation by governmental authorities in the United States and other countries. In the United States,
pharmaceutical products are regulated by the Food and Drug Administration (the “FDA”) under the Federal Food, Drug, and Cosmetic
Act (the “FDCA”) and other laws. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service
Act, and related regulations, and other federal, state and local statutes and regulations. Biological products include, among other things,
viruses, therapeutic serums, vaccines and most protein products. Product development and approval within these regulatory frameworks takes
a number of years and involves the expenditure of substantial resources.
Regulatory approval will be required in all major markets in which
we, or our licensees, seek to test any future products. At a minimum, such approval requires evaluation of data relating to quality, safety
and efficacy of a product for its proposed use. The specific types of data required and the regulations relating to these data differ
depending on the territory, the drug involved, the proposed indication and the stage of development.
In general, new chemical
entities are tested in animal models to determine whether the product is reasonably safe for initial human testing. Additional preclinical
testing continues during the clinical development stage. Clinical trials for new products are typically conducted in three sequential
phases that may overlap. Phase 1 trials typically involve the initial introduction of the pharmaceutical into healthy human volunteers
and focus on testing for safety, dosage tolerance, metabolism, distribution, excretion and clinical pharmacology. In the case of serious
or life-threatening diseases, such as cancer, initial Phase 1 trials are often conducted in patients directly, with preliminary exploration
of potential efficacy. Phase 2 trials involve clinical trials to evaluate the effectiveness of the drug for a particular disease indication
or indications in patients with the disease or condition under study and to determine appropriate dosages and dose regimens and the common
short-term side effects and risks associated with the drug. Phase 2 trials are typically closely monitored and conducted in a relatively
small number of patients, usually involving no more than several hundred subjects. Phase 3 trials are generally expanded, well-controlled
clinical trials. They are performed after preliminary evidence suggesting effectiveness, as well as the appropriate dose and dose ranges
of the drug, have been obtained, and are intended to gather the additional information about effectiveness and safety that is needed to
evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for product labeling.
In the United States, specific
research and preclinical data, chemical data and a proposed clinical study protocol, as described above, must be submitted to the FDA
as part of an Investigational New Drug application, or IND, which, unless the FDA objects, will become effective 30 days following receipt
by the FDA. Phase 1 trials may commence only after the IND application becomes effective. Following completion of Phase 1 trials, further
submissions to regulatory authorities are necessary in relation to Phase 2 and 3 trials to update the existing IND. Authorities may require
additional data before allowing the trials to commence and could demand discontinuation of studies at any time if there are significant
safety issues. In addition to regulatory review, a clinical trial involving human subjects has to be approved by an independent body.
The exact composition and responsibilities of this body differ from country to country. In the United States, for example, each clinical
trial is conducted under the auspices of an Institutional Review Board for any institution at which the clinical trial is conducted. This
board considers among other factors, the design of the clinical trial, ethical factors, the safety of the human subjects and the possible
liability risk for the institution.
Information generated in
this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the approval
process. Failure to demonstrate adequately the quality, safety and efficacy of a therapeutic drug under development would delay or prevent
regulatory approval of the product.
In order to gain marketing
approval, we must submit a new drug application, or NDA, for review by the FDA. The NDA must include a substantial amount of data and
other information concerning safety and effectiveness of the drug compound from laboratory, animal and clinical testing, as well as data
and information on manufacturing, product stability, and proposed product labeling.
There can be no assurance
that if clinical trials are completed that we or any future collaborative partners will submit an NDA or similar applications outside
of the United States for required authorizations to manufacture or market potential products, or that any such applications will be reviewed
or approved in a timely manner. Approval of an NDA, if granted at all, can take several months to several years, and the approval process
can be affected by a number of factors. Additional studies or clinical trials may be requested during the review and may delay marketing
approval and involve unbudgeted costs. Regulatory authorities may conduct inspections of relevant facilities and review manufacturing
procedures, operating systems and personnel qualifications. In addition to obtaining approval for each product, in many cases each drug
manufacturing facility must be approved. Further, inspections may occur over the life of the product. An inspection of the clinical investigation
sites by a competent authority may be required as part of the regulatory approval procedure. As a condition of marketing approval, the
regulatory agency may require post-marketing surveillance to monitor adverse effects, or other additional studies as deemed appropriate.
After approval for the initial disease indication, further clinical studies are usually necessary to gain approval for additional indications.
The terms of any approval, including labeling content, may be more restrictive than expected and could affect product marketability.
AVAILABLE INFORMATION
The internet address of our
corporate website is http://www.cohbar.com.
We file annual reports, quarterly
reports, current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under
the Securities Exchange Act of 1934, as amended. Our filings with the SEC, including any amendments to our filings, are available free
of charge on the SEC’s website at www.sec.gov and on our website under the “Investors” tab as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC.
The contents of our corporate
website are not incorporated into, or otherwise to be regarded as part of, this Annual Report on Form 10-K.
Item 1A. Risk Factors
Summary of Risk Factors
Investing in our common stock
involves significant risks. You should carefully consider the risks and uncertainties described below, together with all of the other
information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our audited financial statements and related notes, and other filings we have made and make in the future
with the Securities and Exchange Commission. If any of the following risks are realized, our business, financial condition, results of
operations and prospects could be materially and adversely affected. In such case, the trading price of our common stock would likely
decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face:
| ● | we may not be successful in identifying and implementing any strategic
alternatives, including a potential merger, business combination, investment into the Company, asset sale or other strategic transaction,
and any such strategic transaction that we may consummate in the future could have negative consequences; |
| ● | if
we are successful in completing a strategic alternative, we may be exposed to other operational
and financial risks; |
| ● | our
ability to consummate a strategic alternative depends upon our ability to retain our employees
required to consummate such transaction; |
| ● | we may become involved in securities litigation that could divert management’s
attention and harm our business, and insurance coverage may not be sufficient to cover all costs and damages; |
| ● | if
we decide to dissolve and liquidate, the amount of cash that may be available for distribution
to our stockholders is uncertain; |
| ● | we
have had a history of losses and no revenue; |
| ● | we
are an early-stage biotechnology company and may never be able to successfully develop marketable
products or generate any revenue. We have a limited relevant operating history upon which
an evaluation of our performance and prospects can be made. There is no assurance that our
future operations will result in profits. If we cannot generate sufficient revenues, we may
suspend or cease operations; |
| ● | if we fail to demonstrate efficacy or safety in any future research
and clinical trials, our future business prospects, financial condition and operating results will be materially adversely affected; |
| ● | if any future clinical trials are delayed, suspended or terminated,
we may be unable to develop future product candidates on a timely basis, which would adversely affect our ability to obtain regulatory
approvals, increase our development costs and delay or prevent commercialization of any approved products; |
| ● | our
future success depends on key members of our management team; |
| ● | we
may seek to establish development and commercialization collaborations, and, if we are not
able to establish them on commercially reasonable terms, we may have to alter our development
and commercialization plans; |
| ● | we have not been successful to date in our efforts to develop commercially
viable formulations in our product candidates; |
| ● | we
may not be successful in our efforts to develop commercially viable formulations for our
product candidates; |
| ● | our future research and development plans will require substantial
additional future funding which could impact our operational and financial condition. Without the required additional funds, we will likely
cease operations; |
| ● | if
we do not achieve any future projected development goals in the time frames we announce and expect, the commercialization of any such
future products may be delayed and, as a result, our stock price may decline; |
| ● | even if we are able to develop future potential drug candidates, we
may not be able to obtain regulatory approval, or if approved, we may not be able to generate significant revenues or successfully commercialize
our products, which will adversely affect our financial results and financial condition, and we will have to delay or terminate some or
all of our research and development plans, which may force us to cease operations; |
| ● | even
if we are successful in developing future drug candidates, we may not be able to market or generate sales of such future products to
the extent anticipated. Our business may fail, and investors could lose all of their investment in our Company; |
| ● | interim and preliminary or topline data from our future clinical trials
that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification
procedures that could result in material changes in the final data; |
| ● | any future product candidate we are able to develop and commercialize would compete in the marketplace
with existing therapies and new therapies that may become available in the future. These competitive therapies may be more effective,
safer, better tolerated, less costly, more easily administered or offer other advantages over any product we seek to market; |
| ● | the use of any of our future products in clinical trials, and the results
of those trials, may expose us to liability claims, which may cost us significant amounts of money to defend against or pay out, causing
our business to suffer; |
| ● | if
we fail to establish and maintain proper and effective internal control over financial reporting in the future, our ability to produce
accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and,
as a result, the value of our common stock; |
| ● | if
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they
change their recommendations regarding our stock adversely, our stock price and trading volume could decline; and |
| ● | if we are not able to comply with the applicable continued
listing requirements or standards of Nasdaq, our common stock could be delisted; |
We
operate in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in this Annual
Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties that presently are not
considered material or are not known to us, and therefore are not mentioned herein, may impair our business operations. If any of the
risks described in this Annual Report on Form 10-K actually occur, our business, operating results and financial position could be adversely
affected.
Risks Related to Strategic Alternative Process
and Potential Strategic Transaction
We may not be successful
in identifying and implementing any strategic alternatives, including a potential merger, business combination, investment into the Company,
asset sale or other strategic transaction, and any such strategic transaction that we may consummate in the future could have negative
consequences.
On November 17, 2022, we announced our retention of Ladenburg Thalmann
& Co. Inc. as a financial advisor to assist us in exploring strategic alternatives. Potential strategic alternatives that may be explored
or evaluated as part of this process include a merger, business combination, investment into the Company, asset sale or other strategic
transaction. Our board of directors has not set a timetable for the conclusion of this review, nor has it made any definitive decisions
related to taking any further actions or potential strategic options at this time or at all.
The process of continuing
to evaluate these strategic alternatives may be very costly, time-consuming and complex and we have incurred, and may in the future incur,
significant costs related to this continued evaluation, such as legal and accounting fees and expenses and other related charges. We may
also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless
of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available
for use in our business.
Potential counterparties in a strategic transaction involving our Company
may place minimal or no value on our assets. Further, the development and any potential commercialization of our product candidates will
require substantial additional cash to fund the costs associated with conducting the necessary preclinical and clinical testing and obtaining
regulatory approval. Consequently, any potential counterparty in a strategic transaction involving our Company may choose not to spend
additional resources and continue to utilize the Company’s peptide library and technology platform and may attribute little or no
value, in such a transaction, to those product assets.
There can be no assurance
that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated,
lead to increased stockholder value, or achieve the anticipated results. If we are unable to consummate a strategic transaction, our board
of directors may decide to pursue a dissolution and liquidation.
If we are successful
in completing a strategic alternative, we may be exposed to other operational and financial risks.
Although there can be no
assurance that a strategic alternative will result from the process we have undertaken to identify and evaluate strategic alternatives,
the negotiation and consummation of any such transaction will require significant time on the part of our management, and the diversion
of management’s attention may disrupt our business.
The negotiation and consummation
of any such transaction may also require more time or greater cash resources than we anticipate and
expose us to other operational and financial risks, including:
| ● | increased
near-term and long-term expenditures; |
| ● | exposure
to unknown liabilities; |
| ● | higher
than expected acquisition or integration costs; |
| ● | incurrence
of substantial debt or dilutive issuances of equity securities to fund future operations; |
| ● | write-downs
of assets or goodwill or incurrence of non-recurring, impairment or other charges; |
| ● | increased
amortization expenses; |
| ● | difficulty
and cost in combining the operations and personnel of any acquired business with our operations
and personnel; |
| ● | impairment
of relationships with key suppliers or customers of any acquired business due to changes
in management and ownership; |
| ● | inability
to retain key employees of our Company or any acquired business; and |
| ● | possibility
of future litigation. |
Any
of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.
Our ability to consummate
a strategic alternative depends on our ability to retain our employees required to consummate such transaction.
Our ability to consummate
a strategic alternative depends upon our ability to retain our employees required to consummate such a transaction, the loss of whose
services may adversely impact the ability to consummate such transaction. If we are unable to successfully retain these employees, we
are at risk of a disruption to our exploration and consummation of a strategic alternative as well as business operations.
We may become involved
in securities litigation that could divert management’s attention and harm the Company’s business, and insurance coverage
may not be sufficient to cover all costs and damages.
In the past, securities litigation
has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction,
or the announcement of negative events, such as negative results from clinical trials. We may be exposed to such litigation even if no
wrongdoing occurred. Litigation is usually expensive and diverts management’s attention and resources, which could adversely affect
our business and cash resources and our ability to consummate a potential strategic alternative or the ultimate value our stockholders
receive in any such transaction.
If we decide to dissolve and liquidate our
Company, the amount of cash that may be available for distribution to our stockholders is uncertain.
If our board of directors
decides to pursue a dissolution and liquidation of our Company, the amount of cash that may be available for distribution to our stockholders
is uncertain. This amount will depend on the resolution of our financial commitments and contingent liabilities and the timing of the
decision to liquidate. Our financial commitments and contingent liabilities include: (i) personnel costs, including severance; (ii) contractual
obligations to vendors and clinical study sites; and (iii) non-cancelable lease obligations.
Risks Related to Our Financial Position and
Need for Additional Capital
We have had a history
of losses and no revenue.
We have generated substantial
accumulated losses since our inception. We have not generated any revenues from our operations to date and do not expect to generate any
revenue in the near future. As a result, our management expects the business to continue to experience negative cash flow for the foreseeable
future. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future.
Until we can generate significant
revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing or one or more strategic alternatives (as
discussed above). We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at
all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities,
or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results
of operations. In the event we are not able to continue operations, investors will likely suffer a complete loss of their investments
in our securities.
We are an early-stage
biotechnology company and may never be able to successfully develop marketable products or generate any revenue. We have a limited relevant
operating history upon which an evaluation of our performance and prospects can be made. There is no assurance that our future operations
will result in profits. If we cannot generate sufficient revenues, we may suspend or cease operations.
We are an early-stage company.
Our operations to date have been limited to organizing and staffing our Company, business planning, raising capital, identifying MDPs
for further research, developing our intellectual property portfolio, performing research on identified MDPs and our novel analogs and
progressing our most advanced drug candidate into and through clinical studies. We have not generated any revenues to date. All of our
novel peptide analogs are in the concept, research or early clinical stages. We have not been able to identify suitable formulations for
our CB4211 or CB5138-3 product candidates and there can be no assurances that we will be able to develop suitable formulations for any
future product candidates. Moreover, we cannot be certain that any research and development efforts that we may undertake in the future
will be successful or, if successful, that our novel peptide analogs will ever be approved by the FDA. We have no relevant operating history
upon which an evaluation of our performance and prospects can be made. We are subject to all of the business risks associated with a new
enterprise, including, but not limited to, risks of unforeseen capital requirements, evaluating and implementing a strategic alternative
(as discussed above), failure of potential drug candidates either in research, preclinical testing or in clinical trials, and failure
to establish business relationships and competitive advantages against other companies. If we fail to become profitable, we may be forced
to suspend or cease operations.
If we fail to
demonstrate efficacy or safety in any future research and clinical trials, our future business prospects, financial condition and
operating results will be materially adversely affected.
The success of any future research and development efforts will greatly
depend on our ability to demonstrate efficacy of our novel peptide analogs in non-clinical studies, as well as in clinical trials. Non-clinical
studies involve testing potential drug candidates in appropriate non-human disease models to demonstrate efficacy and safety. Regulatory
agencies evaluate these data carefully before they will approve clinical testing in humans. If certain non-clinical data reveals potential
safety issues or the results are inconsistent with an expectation of the potential drug’s efficacy in humans, the program may be
discontinued or the regulatory agencies may require additional testing before allowing human clinical trials. This additional testing
will increase program expenses and extend timelines. We may decide to suspend further testing on our potential drugs if, in the judgment
of our management and advisors, the non-clinical test results do not support further development. For example, in December 2022, we announced
that we had suspended further IND-enabling activities for our CB5138-3 product candidate due to challenges in identifying a suitable formulation
for clinical development.
Moreover, success in future research, preclinical testing and early
clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical
trials will replicate the results of prior clinical trials and non-clinical testing. Any future clinical trial process may fail to demonstrate
that our potential drug candidates are safe for humans and effective for indicated uses. This failure would cause us to abandon a drug
candidate and may delay development of other potential drug candidates. Any delay in, or termination of, future non-clinical testing or
clinical trials will delay the filing of any future investigational new drug application and new drug application with the FDA or the
equivalent applications with pharmaceutical regulatory authorities outside the United States and, ultimately, our ability to commercialize
any potential drugs and generate product revenues. In addition, our Phase 1a/1b trial of CB4211, our most advanced drug candidate, involved,
and we expect that any future early clinical trials that we may conduct will involve, small patient populations. Because of these small
sample sizes, the results of these early clinical trials, including the topline data from our CB4211 Phase 1a/1b trial, may not be indicative
of future results.
Risks Related to Discovery, Development and
Commercialization
If any future clinical
trials are delayed, suspended or terminated, we may be unable to develop future product candidates on a timely basis, which would adversely
affect our ability to obtain regulatory approvals, increase our development costs and delay or prevent commercialization of any approved
products.
We cannot predict whether we will encounter problems with our future
clinical trials that will cause regulatory agencies, institutional review boards, or us to suspend or delay a trial. We have experienced
delays in both our CB4211 and CB5138-3 programs. Our Phase 1a/1b clinical trial for CB4211 was suspended in November 2018 in order to
address injection site reactions, and was delayed again in March 2020 due to impacts of the COVID-19 pandemic. Our planned IND filing
for our CB5138-3 product candidate was delayed from the second half of 2022 to the second half of 2023 due to the observation of injection
site reactions in our preclinical toxicology studies. Ultimately, our efforts to mitigate these injection site reactions by improving
the formulation for this product candidate were unsuccessful and in December 2022, we announced that we had suspended further IND-enabling
activities for this peptide.
Clinical trials and clinical
data collection protocols can be delayed for a variety of reasons, including:
| ● | unanticipated
consequences of the formulation of the product candidate requiring us to pause the trial
to investigate alternative formulations; |
| ● | the
occurrence of unacceptable drug-related side effects or adverse events experienced by participants
in our clinical trials; |
| ● | discussions
with the FDA regarding the scope or design of our clinical trials and clinical data collection
protocols; |
| ● | delays
or the inability to obtain required approvals from institutional review boards or other responsible
entities at clinical sites selected for participation in our existing or future clinical
trials; |
| ● | adverse
findings in clinical or nonclinical studies related to the safety of our product candidates
in humans; |
| ● | the
amendment of clinical trial or data collection protocols to reflect changes in regulatory
requirements and guidance or other reasons, as well as subsequent re-examination of amendments
of clinical trial or data collection protocols by institutional review boards or other responsible
bodies; and |
| ● | the
need to repeat or conduct additional clinical trials as a result of inconclusive or negative
results, failure to replicate positive early clinical data in subsequent clinical trials,
failure to deliver an efficacious dose of a product candidate, poorly executed testing, a
failure of a clinical site to adhere to the clinical protocol, an unacceptable study
design or other problems. |
In addition, a future clinical trial or development program may be
suspended or terminated by us, institutional review boards, the FDA or other responsible bodies due to a number of factors, including:
| ● | failure
to conduct the clinical trial in accordance with regulatory requirements or our clinical
protocols; |
| ● | inspection
of the clinical trial operations or trial sites by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold; |
| ● | inability
to resume a suspended trial in a timely manner, which we cannot predict with certainty, if
at all; |
| ● | unforeseen
safety issues or any determination that a trial presents unacceptable health risks; |
| ● | inability
to deliver an efficacious dose of a product candidate; and |
| ● | lack
of adequate funding to continue the clinical trial. |
If the results of our future clinical trials are not available when
we expect or if we encounter any delay in the analysis of data from our future clinical trials, we may be unable to conduct additional
clinical trials on the schedule we anticipate. Many of the factors that cause, or lead to, a delay in the commencement or completion of
future clinical trials may also ultimately lead to the denial of regulatory approval of a future product candidate. Any delays in completing
a clinical trial could increase our development costs, delay or prevent the availability of topline data expected to be available from
the trial, delay product development and regulatory submission process or make it difficult to raise additional capital.
If we do not achieve
any future projected development goals in the time frames we announce and expect, the commercialization of any such future products may
be delayed and, as a result, our stock price may decline.
From time to time, we have estimated the timing of the anticipated
accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones.
These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory
filings. From time to time, we have publicly announced and may in the future publicly announce the expected timing of some of these milestones.
All of these milestones have been and will be based on numerous assumptions, including timely performance by our CROs and other vendors,
positive clinical and preclinical results, our ability to develop commercially viable formulations for our product candidates, and sufficient
funding from partnering and general fundraising. The actual timing of these milestones have varied dramatically compared to our estimates,
in some cases for reasons beyond our control. For example, we initially projected that we would have topline results from our 1a/1b clinical
trial for CB4211 trial in early 2019. The trial was substantially delayed and we did not release topline results for this study until
August of 2021. For our CB5138-3 product candidate, we initially projected that we would file an IND for this program in the second half
of 2022. We later revised this estimate to the second half of 2023 and, in December 2022, we announced the suspension of IND-enabling
activities for this program due to challenges in identifying a suitable formulation for clinical development. The delays in each of these
programs resulted in declines in our stock price. If we fail to meet future milestones as publicly announced, or at all, our revenue may
be lower than expected, the commercialization of our products may be delayed or never achieved and, as a result, our stock price may decline.
Our
future success depends on key members of our management team.
We are highly dependent on
our key management team, including our Chief Executive Officer and Chief Financial Officer who are employed “at will,” meaning
they may terminate the employment relationship at any time. We do not maintain “key person” insurance for any of the key members
of our team. We have in the past and may in the future continue to experience changes in our executive management team resulting from
the departure of executives or subsequent hiring of new executives. The loss of the services of our Chief Executive Officer or Chief Financial
Officer could impede our ongoing exploration of strategic alternatives, as discussed above.
We may seek to establish
development and commercialization collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have
to alter our development and commercialization plans.
Our potential future drug
development programs and the potential commercialization of our future drug candidates will require substantial additional cash to fund
expenses. We may decide to collaborate with biopharmaceutical companies in connection with the development or commercialization of our
potential future drug candidates.
We face significant competition
in seeking appropriate collaborators. Whether we reach a definitive collaboration agreement will depend, among other things, upon our
assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
collaborator’s evaluation of a number of factors. Those factors may include the expected efficacy, safety and tolerability of the
subject product candidate, the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities
outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering
such product candidate to patients, the potential reimbursement rates for such product candidates, the potential of competing products,
the strength of our data supporting the mechanism of action of the subject product candidate, the existence of uncertainty with respect
to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge,
and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar
disease indications on which to collaborate, and whether such alternative collaboration project could be more attractive than one with
us for our product candidate.
There are a limited number of large biopharmaceutical companies with
whom we could potentially collaborate, and collaborations are complex and time-consuming to negotiate and document. We may not be able
to negotiate collaborations on a timely basis, on acceptable terms or at all. If we are unable to do so, we may have to curtail the development
of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other
development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to
fund future development or commercialization activities on our own, we may need to obtain additional capital, which may not be available
to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop future product candidates
or bring them to market and generate product revenue.
We may not be successful
in our efforts to identify or discover potential drug development candidates.
A key element of our strategy has been to identify and test MDPs and
novel analogs that play a role in cellular processes underlying our targeted disease indications. Our drug discovery efforts may not be
successful in identifying novel peptide analogs that are useful in treating disease. Our research programs may initially show promise
in identifying potential drug development candidates, yet fail to yield candidates for preclinical and clinical development. For example,
in December 2022, we announced that we had suspended further IND-enabling activities for our CB5138-3 product candidate due to challenges
in identifying a suitable formulation for clinical development. Similarly, we have not been able to identify a formulation for CB4211
that would be suitable to move it forward to the next stage of clinical development. There are a number of reasons why any future research
efforts may not yield appropriate development candidates, including:
| ● | the research methodology used may not be successful in identifying
appropriate potential drug development candidates; |
| ● | we may not be able to identify the mechanism of action for
potential drug candidates, which may make it more difficult to develop and commercialize such drug candidates due to the potential desire
of the FDA and other regulatory bodies, potential partners, physicians and patients to understand such mechanism of action; or |
| ● | potential drug development candidates may, on further study,
be shown not to be effective in humans, or to have unacceptable toxicities, harmful side effects, properties that make them difficult
or impossible to formulate in a commercial fashion, or other characteristics that indicate that they are unlikely to be medicines that
will receive marketing approval and achieve market acceptance. |
We have not been successful
to date in our efforts to develop commercially viable formulations for our product candidates.
Our product candidates are
comprised of novel peptide analogs. We expect that our product candidates will need to be delivered via subcutaneous injection and may
cause local injection site reactions (“ISRs”), which is a common finding in peptide therapeutic product candidates. While
not necessarily adverse to patients’ health, ISRs could substantially limit the commercial appeal of our product candidates, and
we may decide or be required to perform additional preclinical studies or to halt or delay further
clinical development of our product candidates. To date, we have not been able to identify suitable formulations for our CB4211 or CB5138-3
product candidates. It is possible that other product candidates that we may identify will also result in ISRs. Our approach to
address these ISRs is to develop novel formulations that decrease or eliminate these reactions. If we are unable to successfully develop
such formulations, we may decide to abandon those drug candidates as we have done with CB5138-3. Any efforts to identify alternate drug
candidates that do not cause ISRs would take additional time and expense and may not be successful.
Our future research
and development plans will require substantial additional funding which could impact our operational and financial condition. Without
the required additional funds, we will likely cease operations.
It will take several years
before we are able to develop potentially marketable products, if at all. Our future research and development plans will require substantial
additional capital to:
| ● | conduct research, preclinical testing and human studies; |
| ● | manufacture any future drug development candidate or product
at pilot and commercial scale; |
| ● | develop and manufacture devices compatible with our drug
products that are suitable for use by patients to inject our drug products on a chronic basis; and |
| ● | establish and develop quality control, regulatory, and administrative
capabilities to support these programs. |
Our future operating and
capital needs will depend on many factors, including:
| ● | the pace of scientific progress in our future research programs
and the magnitude of these programs; |
| ● | the scope and results of preclinical testing and human studies; |
| ● | the time and costs involved in obtaining regulatory approvals; |
| ● | the time and costs involved in preparing, filing, prosecuting,
securing, maintaining and enforcing intellectual property rights; |
| ● | the complexity of any delivery device that we develop for
use in combination with our drug products; |
| ● | competing technological and market developments; |
| ● | our ability to establish additional collaborations; |
| ● | changes in any future collaborations; |
| ● | the cost of manufacturing any drug products and any related
delivery device; and |
| ● | the cost and effectiveness of efforts to commercialize and
market any products. |
We base our outlook regarding
the need for funds on many uncertain variables. Such uncertainties include the initiation and success of any future research and development
initiatives, regulatory approvals, the timing of events outside our direct control such as negotiations with potential strategic partners,
and other factors. Any of these uncertain events can significantly change our cash requirements as they determine such one-time events
as the receipt or payment of major milestones and other payments.
Additional funds will be
required to support our operations, and if we are unable to obtain them on favorable terms or at all, we may be required to cease or reduce
future research and development of our drug product programs, sell or abandon some or all of our intellectual property, merge with another
entity or cease operations.
Even if we are able
to develop future potential drug candidates, we may not be able to obtain regulatory approval, or if approved, we may not be able to
generate significant revenues or successfully commercialize our products, which will adversely affect our financial results and financial
condition, and we will have to delay or terminate some or all of our research and development plans, which may force us to cease operations.
All of our future potential
drug candidates will require extensive additional research and development, including preclinical testing and clinical trials, as well
as regulatory approvals, before we can market them. We cannot predict if or when any future potential drug candidate will be approved
for marketing. There are many reasons that we may fail in our efforts to develop our future potential drug candidates. These include:
| ● | the possibility that preclinical testing or clinical trials
may show that our potential drugs are ineffective and/or cause undesirable or harmful side effects or toxicities; |
| ● | we may not be able to develop commercially viable formulations
for our potential drug candidates; |
| ● | our potential drugs may prove to be too expensive to manufacture
or administer to patients; |
| ● | our potential drugs may have routes of administration that
are less convenient or acceptable to patients; |
| ● | we may not understand the mechanism of action of our potential
drugs, which could negatively impact our ability to recruit patients to participate in the clinical trials necessary for regulatory approval
of our potential drugs; |
| ● | our potential drugs may fail to receive necessary regulatory
approvals from the FDA or foreign regulatory authorities in a timely manner, or at all; |
| ● | even if our potential drugs are approved, we may not be able
to produce them in commercial quantities or at reasonable costs; |
| ● | even if our potential drugs are approved, they may not achieve
commercial acceptance; |
| ● | even if our potential drugs are approved and commercially
launched, the costs of any delivery device used in combination with our drug products may result in an overall manufacturing cost that
is not competitive with competing products that do not require a delivery device; |
| ● | even if our potential drugs are approved and commercially
launched, they may not receive desirable payor reimbursement and formulary access; |
| ● | regulatory or governmental authorities may apply restrictions
to any of our potential drugs, which could adversely affect their commercial success; and |
| ● | the proprietary rights of other parties may prevent us or
our potential collaborative partners from marketing our potential drugs. |
If we fail to develop future potential drug candidates, our financial results and financial condition will be adversely affected, we will have to delay or terminate
some or all of our research and development plans and may be forced to cease operations.
Risks Related to Our Reliance on Third Parties
If we do not maintain
the support of qualified scientific collaborators, our revenue, growth and profitability will likely be limited, which would have a material
adverse effect on our business.
We will need to maintain
our existing relationships with leading scientists and/or establish new relationships with scientific collaborators. We believe that such
relationships are pivotal to establishing products using our technologies as a standard of care for various disease indications. There
is no assurance that our founders, scientific advisors or research partners will continue to work with us or that we will be able to attract
additional research partners. If we are not able to establish scientific relationships to assist in future research and development, we
may not be able to successfully develop potential drug candidates in the future. If this happens, our business will be adversely affected.
We expect to rely
on third parties to conduct any future clinical trials and some aspects of any future research and preclinical testing. These third parties
may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or preclinical testing.
We expect to rely on third
parties to conduct some aspects of our future research and expect to rely on third parties to conduct additional aspects of our future
research and preclinical testing, as well as any future clinical trials. Any of these third parties may terminate their engagements with
us at any time. If we need to enter into alternative arrangements, it would delay our future product research and development activities.
Our reliance on these third
parties for future research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.
For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational
plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices,
for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical
trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes.
Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, these third
parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully
carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements
or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our future drug candidates
and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines. For example, we experienced delays
in receiving the data from our third-party CRO conducting our CB4211 Phase 1b study, which delayed our analysis and release of topline
data.
We expect to rely on other third parties to store and distribute drug
supplies for our future clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing
approval of our future drug candidates or commercialization of any future products, producing additional losses and depriving us of potential
product revenue.
Risks Related to Product Development and Regulatory
Approval
Even if we are successful
in developing future drug candidates, we may not be able to market or generate sales of such future products to the extent anticipated.
Our business may fail, and investors could lose all of their investment in our Company.
Assuming that we are successful in developing any future potential
drug candidates and receiving regulatory clearances to market our potential products, our ability to successfully penetrate the market
and generate sales of such future products may be limited by a number of factors, including the following:
| ● | if our competitors receive regulatory approvals for and begin
marketing similar products in the United States, the European Union (“EU”), Japan and other territories before we do, greater
awareness of their products as compared to ours will cause our competitive position to suffer; |
| ● | information from our competitors or the academic community
indicating that current products or new products are more effective, have better safety or tolerability profiles or offer compelling
other benefits than our future products could impede our market penetration or decrease our future market share; and |
| ● | the pricing and reimbursement environment for our future
products, as well as pricing and reimbursement decisions by our competitors and by payers, may have an effect on our revenues. |
If any of these occur, our business could be adversely
affected.
Interim
and preliminary or topline data from our future clinical trials that we announce or publish from time to time may change as more patient
data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim topline or preliminary data
from our future clinical trials. Interim data from future clinical trials that we may complete are subject to the risk that one or more
of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or
topline data also remain subject to audit and verification procedures that may result in the final data being materially different from
the preliminary or topline data we previously published. As a result, interim and preliminary data should be viewed with caution until
the final data are available. Adverse differences between interim or preliminary or topline data and final data could significantly harm
our reputation and business prospects.
Any future
product candidate we are able to develop and commercialize would compete in the marketplace with existing therapies and new
therapies that may become available in the future. These competitive therapies may be more effective, safer, better tolerated, less
costly, more easily administered or offer other advantages over any product we seek to market.
There are numerous therapies currently marketed to treat IPF, diabetes,
cancer, and other diseases for which our future potential product candidates may be indicated. These therapies are varied in their design,
therapeutic application and mechanism of action and may provide significant competition for any of our future product candidates for which
we obtain market approval. New products may also become available that provide efficacy, safety, tolerability, convenience and other benefits
that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our future product
candidates for which we obtain market approval. Our commercial opportunity could be reduced or eliminated if our competitors develop and
commercialize products that are safer, better tolerated, more effective, have fewer or less severe side effects, are more conveniently
administered (i.e., are administered via methods other than subcutaneous injection) or stored or are less expensive than any products
that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain
approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
In addition, our ability to compete may be affected in many cases by insurers’ or other third-party payers’ reimbursement
polices seeking to encourage the use of existing products that are generic or are otherwise less expensive to provide.
The use of any of our
future products in clinical trials, and the results of those trials, may expose us to liability claims, which may cost us significant
amounts of money to defend against or pay out, causing our business to suffer.
The nature of our business
exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our potential products. If any of our
future drug candidates are used in clinical trials, or if any of our future drug candidates become marketed products, they could potentially
harm people or allegedly harm people, possibly subjecting us to costly and damaging product liability claims. Some of the patients who
participate in clinical trials are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion
criteria. The waivers we obtain may not be enforceable and may not protect us from liability or the costs of product liability litigation.
Although we obtained product liability insurance, which we believe is adequate, we are subject to the risk that our insurance will not
be sufficient to cover claims. We anticipate that we will need to increase our insurance coverage if we successfully commercialize any
product candidate. The insurance costs along with the defense or payment of liabilities above the amount of coverage could cost us significant
amounts of money and management distraction from other elements of the business, decrease demand for any product candidates that we may
develop, injure our reputation and attract significant negative media attention, and lead to the withdrawal of clinical trial participants,
causing our business to suffer. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy
any liability that may arise.
Compliance with laws
and regulations pertaining to the privacy and security of health information may be time consuming, difficult and costly, particularly
in light of increased focus on privacy issues in countries around the world, including the United States and the EU.
We are subject to various
domestic and international privacy and security regulations. The confidentiality, collection, use and disclosure of personal data, including
clinical trial patient-specific information, are subject to governmental regulation generally in the country that the personal data were
collected or used. In the United States, we are subject, or expect to be subject, to various state and federal privacy and data security
regulations, including but not limited to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended
by the Health Information Technology for Economic and Clinical Health Act of 2009. HIPAA mandates, among other things, the adoption of
uniform standards for the electronic exchange of information in common health care transactions, as well as standards relating to the
privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical
safeguards to protect such information. In the EU, personal data includes any information that relates to an identified or identifiable
natural person with health information carrying additional obligations, including obtaining the explicit consent from the individual for
collection, use or disclosure of the information. In addition, the protection of and cross-border transfers of such data out of the EU
has become more stringent with the EU’s General Data Protection Regulation which came into effect in May 2018. Furthermore, the
legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus
on privacy and data protection issues. The United States and the EU and its member states continue to issue new privacy and data protection
rules and regulations that relate to personal data and health information. Compliance with these laws may be time consuming, difficult
and costly. If we fail to comply with applicable laws, regulations or duties relating to the use, privacy or security of personal data,
we could be subject to the imposition of significant civil and criminal penalties, be forced to alter our business practices and suffer
reputational harm.
We may not be able
to obtain agreement with regulatory authorities regarding an acceptable development plan for our future product candidates, the outcome
of our future clinical trials may not be favorable or, even if favorable, regulatory authorities may not find the results of our future
clinical trials to be sufficient for marketing approval.
In the United States, the FDA generally requires two adequate and well-controlled
pivotal clinical trials to approve a new drug application (“NDA”). Furthermore, for full approval of an NDA, the FDA requires
a demonstration of efficacy based on a clinical benefit endpoint. The FDA may grant accelerated approval based on a surrogate endpoint
reasonably likely to predict clinical benefit. Even if any future pivotal clinical trials for a specific indication were to achieve their
primary endpoints and may be reasonably believed by us to be likely to predict clinical benefit, the FDA may not accept the results of
such trials or approve our future product candidates on an accelerated basis, or at all. It is also possible that the FDA may refuse to
accept for filing and review any regulatory application we submit for regulatory approval in the United States. Even if our regulatory
application is accepted for review, there may be delays in the FDA’s review process and the FDA may determine that such regulatory
application does not contain adequate clinical or other data or support the approval of our future product candidate. In such a case,
the FDA may issue a complete response letter that may require that we conduct and/or complete additional clinical trials and preclinical
studies or provide additional information or data before it will reconsider an application for approval. Any such requirements may be
substantial, expensive and time-consuming, and there is no guarantee that we will continue to pursue such application or that the FDA
will ultimately decide that any such application supports the approval of our future product candidate. Furthermore, the FDA may also
refer any regulatory application to an advisory committee for review and recommendation as to whether, and under what conditions, the
application should be approved. While the FDA is not bound by the recommendation of an advisory committee, it considers such recommendations
carefully when making decisions. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring
a potential product to market could decrease our ability to generate sufficient revenue to maintain our business.
The regulatory approval
process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our future product candidates
under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our future product
candidates and adversely impact our ability to generate revenue, our business and our results of operations.
The development, research,
testing, manufacturing, labeling, approval, selling, import, export, marketing, promotion and distribution of drug products are subject
to extensive and evolving regulation by federal, state and local governmental authorities in the United States, principally the FDA, and
by foreign regulatory authorities, which regulations differ from country to country. Neither we nor any future collaborator is permitted
to market any of our product candidates in the United States until we receive regulatory approval of an NDA from the FDA.
Obtaining regulatory approval
of an NDA can be a lengthy, expensive and uncertain process. Prior to obtaining approval to commercialize our future product candidate
in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials,
and to the satisfaction of the FDA or other foreign regulatory authorities, that such product candidates are safe and effective for their
intended uses. The number of nonclinical studies and clinical trials that will be required for regulatory approval varies depending on
the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any
particular product candidate.
Results from nonclinical
studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for our future product
candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Administering
product candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials and result in
the FDA or other regulatory authorities denying approval of a product candidate for any or all indications. The FDA may also require us
to conduct additional studies or trials for our product candidates either prior to or post-approval, such as additional clinical pharmacology
studies or safety or efficacy studies or trials, or it may object to elements of our clinical development program such as the primary
endpoints or the number of subjects in our clinical trials.
The FDA or any foreign regulatory
bodies can delay, limit or deny approval of our product candidates or require us to conduct additional nonclinical or clinical testing
or abandon a program for many reasons, including:
| ● | the
FDA or the applicable foreign regulatory authority’s disagreement with the design or
implementation of our clinical trials; |
| ● | negative
or ambiguous results from our clinical trials or results that may not meet the level of statistical
significance required by the FDA or comparable foreign regulatory authorities for approval; |
| ● | serious
and unexpected drug-related side effects experienced by participants in our clinical trials; |
| ● | our
inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory
authority that our product candidates are safe and effective for the proposed indication; |
| ● | the
FDA’s or the applicable foreign regulatory authority’s disagreement with the
interpretation of data from nonclinical studies or clinical trials; |
| ● | our
inability to demonstrate the clinical and other benefits of our product candidates outweigh
any safety or other perceived risks; |
| ● | the
FDA’s or the applicable foreign regulatory authority’s requirement for additional
nonclinical studies or clinical trials; |
| ● | the
FDA’s or the applicable foreign regulatory authority’s disagreement regarding
the formulation, labeling and/or the specifications of our product candidates; |
| ● | the
FDA’s or the applicable foreign regulatory authority’s failure to approve the
manufacturing processes or facilities of third-party manufacturers with which we contract; |
| ● | the
potential for approval policies or regulations of the FDA or the applicable foreign regulatory
authorities to significantly change in a manner rendering our clinical data insufficient
for approval; or |
| ● | the
FDA or the applicable foreign regulatory authority’s disagreement with the sufficiency
of the clinical, non-clinical and/or quality data in the NDA or comparable marketing authorization
application. |
Of
the large number of drugs in development, only a small percentage successfully complete the FDA or other regulatory approval processes
and are commercialized. The lengthy development and approval process as well as the unpredictability of future clinical trial results
may result in our failing to obtain regulatory approval to market our future product candidates, which would significantly harm our business,
financial condition, results of operations and prospects.
Any
future product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and
could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply
with regulatory requirements or if we experience unanticipated problems with our future product candidates, when and if any of them are
approved.
Our
future product candidates and the activities associated with their development and potential commercialization, including their testing,
manufacturing, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive
regulation by the FDA and other U.S. and international regulatory authorities. These requirements include submissions of safety and other
post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, including current
cGMP, quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by the
FDA and other regulatory authorities and requirements regarding the distribution of samples to providers and recordkeeping.
The
FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy
of any approved product. The FDA closely regulates the post-approval marketing and promotion of drugs and biologics to ensure drugs and
biologics are marketed only for the approved disease indications and in accordance with the provisions of the approved labeling. The FDA
imposes stringent restrictions on manufacturers’ communications regarding use of their products. If we promote our future product
candidates in a manner inconsistent with FDA-approved labeling or otherwise not in compliance with FDA regulations, we may be
subject to enforcement action. Violations of the Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead
to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws
and similar laws in international jurisdictions.
In addition, later discovery of previously unknown adverse events or
other problems with our future product candidates, manufacturers or manufacturing processes, or failure to comply with regulatory requirements,
may yield various results, including:
| ● | restrictions on such product candidates, manufacturers or
manufacturing processes; |
| ● | restrictions on the labeling or marketing of a product; |
| ● | restrictions on product distribution or use; |
| ● | requirements to conduct post-marketing studies or clinical
trials; |
| ● | warning or untitled letters; |
| ● | withdrawal of any approved product from the market; |
| ● | refusal to approve pending applications or supplements to
approved applications that we submit; |
| ● | recall of product candidates; |
| ● | restrictions on product distribution or use; |
| ● | fines, restitution or disgorgement of profits or revenues; |
| ● | suspension or withdrawal of marketing approvals; |
| ● | refusal to permit the import or export of our product candidates; |
| ● | injunctions or the imposition of civil or criminal penalties. |
Non-compliance with
European requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for
the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the EU’s requirements
regarding the protection of personal information can also lead to significant penalties and sanctions.
The patent positions
of biopharmaceutical products are complex and uncertain, and we may not be able to protect our patented or other intellectual property.
If we cannot protect this property, we may be prevented from using it, or our competitors may use it, and our business could suffer significant
harm. Also, the time and money we spend on acquiring and enforcing patents and other intellectual property will reduce the time and money
we have available for our business.
We own or exclusively license
patents and patent applications related to our MDPs and potential drug candidates comprised of novel analogs. However, neither patents
nor patent applications ensure the protection of our intellectual property for a number of reasons, including the following:
| ● | The United States
Supreme Court rendered a decision in Molecular Pathology vs. Myriad Genetics, Inc., 133 S.Ct.
2107 (2013) (“Myriad”), in which the court held that naturally occurring
DNA segments are products of nature and not patentable as compositions of matter. On March 4,
2014, the United States Patent and Trademark Office (“USPTO”) issued guidelines
for examination of such claims that, among other things, extended the Myriad decision to
any natural product. Since MDPs are natural products isolated from cells, the USPTO guidelines
may affect allowability of some of our patent claims (pertaining to natural MDP sequences)
that are filed in the USPTO but are not yet issued. Further, while the USPTO guidelines are
not binding on the courts, it is likely that as the law of subject matter eligibility continues
to develop, Myriad will be extended to natural products other than DNA. Thus, our issued
U.S. patent claims directed to MDPs as compositions of matter may be vulnerable to challenge
by competitors who seek to have our claims rendered invalid. While Myriad and the USPTO guidelines
described above will affect our patents only in the United States, there is no certainty
that similar laws or regulations will not be adopted in other jurisdictions. |
| ● | Competitors may
interfere with our patenting process in a variety of ways. Competitors may claim that they
invented the claimed invention prior to us. Competitors may also claim that we are infringing
their patents and restrict our freedom to operate. Competitors may also contest our patents
and patent applications, if issued, by showing in various patent offices that, among other
reasons, the patented subject matter was not original, was not novel or was obvious. In litigation,
a competitor could claim that our patents and patent applications are not valid or enforceable
for a number of reasons. If a court agrees, we would lose some or all of our patent protection. |
| ● | As a company,
we have no meaningful experience with competitors interfering with our patents or patent
applications. In order to enforce our intellectual property, we may need to file a lawsuit
against a competitor. Enforcing our intellectual property in a lawsuit can take significant
time and money. We may not have the resources to enforce our intellectual property if a third
party infringes an issued patent claim. Infringement lawsuits may require significant time
and money resources. If we do not have such resources, for patents that we have licensed
from a third party, the licensor is not obligated to help us enforce our patent rights. If
the licensor does take action by filing a lawsuit claiming infringement, we will not be able
to participate in the suit and therefore will not have control over the proceedings or the
outcome of the suit. |
| ● | Because of the time, money and effort involved in obtaining and enforcing
patents, our management may spend less time and resources on other aspects of our business than they otherwise would, which could increase
our operating expenses and delay any future product programs. |
| ● | There can be no
assurance that any of our patent applications, including any licensed patent applications,
will result in the issuance of patents, and we cannot predict the breadth of claims that
may be allowed in our currently pending patent applications or in patent applications we
may file or license from others in the future. |
| ● | Issuance of a
patent may not provide much practical protection. If we receive a patent of narrow scope,
then it may be easy for competitors to design products that do not infringe our patent(s). |
| ● | If a court decides
that the method of manufacture or use of any of our drug candidates infringes on a third-party
patent, we may have to pay substantial damages for infringement. |
| ● | A court may prohibit
us from making, selling or licensing a potential drug candidate unless the patent holder
grants a license. A patent holder is not required to grant a license. If a license is available,
we may have to pay substantial royalties or grant cross licenses to our patents, and the
license terms may be unacceptable. |
| ● | Redesigning our
potential drug candidates so that they do not infringe on other patents may not be possible
or could require substantial funds and time. |
It is also unclear whether
our trade secrets are adequately protected. While we use reasonable efforts to protect our trade secrets, our employees or consultants
may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone illegally obtained and is using
our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge, methods and know-how.
We may also support and collaborate in research conducted by government organizations, hospitals, universities or other educational institutions.
These research partners may be unable or unwilling to grant us exclusive rights to technology or products derived from these collaborations
prior to entering into the relationship.
If we do not obtain required intellectual property rights, we could
encounter delays in any future drug development efforts while we attempt to design around other patents or even be prohibited from developing,
manufacturing or selling potential drug candidates requiring these rights or licenses. There is also a risk that disputes may arise as
to the rights to technology or potential drug candidates developed in collaboration with other parties.
General Risk Factors
If
we fail to establish and maintain proper and effective internal control over financial reporting in the future, our ability to produce
accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and,
as a result, the value of our common stock.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure
controls and procedures and that we furnish a report by management on, among other things, the effectiveness of our internal control
over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our
internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over
financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements
will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from
our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, for
as long as we are not an accelerated filer or large accelerated filer, we intend to take advantage of the exemption permitting us not
to comply with the independent registered public accounting firm attestation requirement.
Our compliance with Section 404 will require us to document and
evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue
to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy
of internal control over financial reporting, continue taking steps to improve control processes as appropriate, validate through testing
that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial
reporting. Despite our efforts, there is a risk that we will not be able to conclude that our internal control over financial reporting
is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in
the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, if we are not able to continue
to meet these requirements, we may not be able to remain listed on The Nasdaq Capital Market (“Nasdaq”). If material weaknesses
or deficiencies in our internal controls exist and go undetected or unremedied, our financial statements could contain material misstatements
that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our common
stock to decline.
Significant disruptions
of information technology systems or security breaches could adversely affect our business.
We are increasingly dependent
upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect,
store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property,
proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality
and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result
we have managed, and may in the future continue to manage, a number of third-party vendors who may or could have access to our confidential
information. Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity,
and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise.
The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large
amounts of confidential information potentially stored on those systems, make such systems vulnerable to service interruptions or to
security breaches from inadvertent or intentional actions by our employees, third-party vendors, and/or business partners, or from cyber-attacks
by malicious third parties. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social
engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.
Significant disruptions
of our information technology systems, or those of our third-party vendors, or security breaches could adversely affect our business
operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access
to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary business information
and personal information, and could result in financial, legal, business and reputational harm to us.
Any
failure or perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with our
privacy, confidentiality, data security or similar obligations to third parties, or any data security incidents or other security breaches
that result in the unauthorized access, release or transfer of sensitive information, including personally identifiable information,
may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause
third parties to lose trust in us or could result in claims by third parties asserting that we have breached our privacy, confidentiality,
data security or similar obligations, any of which could have a material adverse effect on our reputation, business, financial condition
or results of operations. Moreover, data security incidents and other security breaches can be difficult to detect, and any delay in
identifying them may lead to increased harm. While we have implemented data security measures intended to protect our information technology
systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or data security
incidents.
Public
health crises such as pandemics or similar outbreaks could adversely impact our business.
Public health crises such
as pandemics or similar outbreaks could adversely impact our business.
The trading prices for our common stock and other biopharmaceutical
companies have been highly volatile as a result of the COVID-19 pandemic and the resulting impact on the macroeconomic environment,
including rising interest rates, inflation and recessionary fears. Future public health crises, including pandemics or similar outbreaks
such as COVID-19, may adversely impact our business, strategy and financial condition. The extent to which any public health crises impacts
our business, strategy or financial condition will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, such as the emergence of novel variants, the impact of vaccinations and vaccination rates, travel restrictions and actions
to contain new outbreaks or resurgences or treat its impact, such as social distancing and quarantines or lock-downs in the United States
and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries
to contain and treat resurgences or novel variants.
If securities or industry
analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations
regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our
common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business,
our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or
provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analysts who may
cover us were to cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause our stock price or trading volume to decline.
The price of our common
stock may be volatile and fluctuate substantially, which could result in substantial losses for holders of our common stock.
The market price of our
common stock has been and is likely to continue to be volatile. The stock market in general, and the market for biotechnology companies
in particular has experienced extreme volatility that can be unrelated to the operating performance of particular companies. The market
price for our common stock may be influenced by many factors, including:
| ● | results of preclinical
studies or clinical trials of our future product candidates or those of our competitors: |
| ● | unanticipated
or serious safety concerns related to the use of any of our future product candidates; |
| ● | challenges in
developing commercially viable formulations for our future product candidates; |
| ● | adverse regulatory
decisions, including failure to receive regulatory approval for any of our future product
candidates; |
| ● | the success of
competitive drugs or technologies; |
| ● | regulatory or
legal developments in the United States and other countries applicable to our future product
candidates; |
| ● | the size and growth
of our prospective patient populations; |
| ● | developments concerning
our future collaborators, our external manufacturers or in-house manufacturing capabilities; |
| ● | inability to obtain
adequate product supply for any future product candidate for preclinical studies, clinical
trials or future commercial sale or inability to do so at acceptable prices; |
| ● | developments or
disputes concerning patent applications, issued patents or other proprietary rights; |
| ● | the recruitment
or departure of key personnel; |
| ● | the level of expenses
related to any of our future product candidates or clinical development programs; |
| ● | the results of
our efforts to discover, develop, acquire or in-license additional product candidates or
drugs; |
| ● | actual or anticipated
changes in estimates as to financial results, development timelines or recommendations by
securities analysts or publications of research reports about us or our industry; |
| ● | variations in
our financial results or those of companies that are perceived to be similar to us; |
| ● | changes in the
structure of healthcare payment systems; |
| ● | market conditions
in the biotechnology sector; |
| ● | our cash position
or the announcement or expectation of additional financing efforts; |
| ● | the impact of
rising inflation, including wage inflation; |
| ● | general macroeconomic,
industry, geopolitical and market conditions; and |
| ● | other factors,
including those described in this “Risk Factors” section, many of which are beyond
our control. |
If we are not able
to comply with the applicable continued listing requirements or standards of Nasdaq, our common stock could be delisted.
Our common stock is currently
listed on Nasdaq. To maintain this listing, we must satisfy continued listing requirements and standards. There can be no assurances that
we will be able to comply with the applicable listing requirements and standards. For example, in November 2021, we received a notice
from the Nasdaq Listing Qualifications Department notifying us that for 30 consecutive trading days, the bid price of our common stock
had closed below the minimum $1.00 per share requirement. In accordance with Nasdaq’s listing rules, we were afforded a grace period
of 180 calendar days, or until May 9, 2022, to regain compliance with the bid price requirement. In order to regain compliance, the bid
price of our common stock had to close at a price of at least $1.00 per share for a minimum of 10 consecutive trading days.
On May 10, 2022, Nasdaq notified us that we had not regained compliance
by May 9, 2022, but that Nasdaq had granted us an additional 180 day period to regain compliance because we met the continued listing
requirement for market value of publicly held shares and all other applicable Nasdaq listing requirements (other than the minimum closing
bid price requirement) and we provided written notice to Nasdaq of our intention to cure the deficiency during the second compliance period,
by effecting a reverse stock split, if necessary. On September 23, 2022, we executed a reverse stock split of our common stock at a ratio
of 1-for-30. In response to their non-compliance notification on May 10, 2022, and as a result of the reverse stock split, we received
notification from The Nasdaq Stock Market Listing Qualifications Staff on October 7, 2022, that we were in compliance with its minimum
bid price requirement and the matter was closed.
If our common stock is delisted from Nasdaq and is not eligible for
quotation or listing on another market or exchange, including as a result of our failure to meet the bid price requirement, trading of
our shares of common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted
securities. In such event, it would likely become more difficult to dispose of, or obtain accurate price quotations for, shares of our
common stock.
Our business could
be negatively affected as a result of significant stockholders or potential stockholders attempting to effect changes or acquire control
over the Company, which could cause us to incur significant expense, hinder execution of our business strategy and impact the trading
value of our securities.
Our stockholders may from
time-to-time attempt to effect changes, engage in proxy solicitations or advance stockholder proposals. Responding to proxy contests
and other actions by activist shareholders can be costly and time-consuming, disrupting our operations and diverting the attention of
our board of directors and senior management from the pursuit of business strategies. Any of these impacts could materially and adversely
affect our business and operating results. Further, the market price of our common stock, which has been trading below book value, could
be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above.
The requirements of
being a public company may strain our resources, divert management’s attention and require us to disclose information that is helpful
to competitors, make us more attractive to potential litigants and make it more difficult to attract and retain qualified personnel.
As a public company, we
are subject to the reporting requirements of the Securities Act of 1933, as amended, the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, and applicable Canadian securities rules and regulations. Despite reforms made
possible by the JOBS Act, compliance with these rules and regulations creates significant legal and financial compliance costs and makes
some activities difficult, time-consuming or costly. The Exchange Act and applicable Canadian provincial securities legislation require,
among other things, that we file annual, quarterly and current reports with respect to our business and operating results.
Additionally, the Sarbanes-Oxley
Act and the related rules and regulations of the SEC and Nasdaq require us to implement particular corporate governance practices and
adhere to a variety of reporting requirements and complex accounting rules. Among other things, we are subject to rules regarding the
independence of the members of our board of directors and committees of the board and their experience in finance and accounting matters,
rules regarding the diversity of our board of directors and certain of our executive officers are required to provide certifications
in connection with our quarterly and annual reports filed with the SEC. The perceived personal risk associated with these rules may deter
qualified individuals from accepting these positions. Accordingly, we may be unable to attract and retain qualified officers and directors.
If we are unable to attract and retain qualified officers and directors, our business and our ability to maintain the listing of our
shares of common stock on Nasdaq or another stock exchange could be adversely affected.
Changes
in U.S. federal income and other tax laws could adversely affect us.
New
U.S. legislation or regulations that could affect our tax burden could be enacted by the U.S. government. We cannot predict the timing
or extent of such tax-related developments that could have a negative impact on our financial results. Additionally,
we use our best judgment in attempting to quantify and reserve for these tax obligations. However, a challenge by a taxing authority,
our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions could
have a material adverse effect on our business, results of operations, or financial condition.
Unfavorable
global macroeconomic conditions and geopolitical uncertainty could adversely affect our business, financial condition or results of operations.
Our
results of operations could be adversely affected by general conditions in the global economy, such as the inflationary environment and
recessionary fears, in the global financial markets and due to geopolitical uncertainty, such as the ongoing conflict in Ukraine and
rising tensions between China and Taiwan. For example, the global financial crisis caused extreme volatility and disruptions in the capital
and credit markets and the recent and ongoing armed conflict in Ukraine had similar impacts on the global financial markets. A severe
or prolonged economic downturn, such as a global financial crisis, could result in a variety of risks to our business, including, weakened
demand for our product candidates and our weakened ability to raise additional capital when needed on acceptable terms, if at all. A
weak or declining economy could also strain our future suppliers, possibly resulting in supply disruptions. Any of the foregoing could
harm our business, and we cannot anticipate all of the ways in which the current macroeconomic climate, geopolitical uncertainty and
financial market conditions could adversely impact our business.
We
or the future third parties upon whom we may depend may be adversely affected by natural disasters, and our business continuity and disaster
recovery plans may not adequately protect us from a serious disaster.
Natural disasters could
severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects.
For example, our corporate headquarters are located in the San Francisco Bay Area, which has experienced both severe earthquakes and
the effects of wildfires. We do not carry earthquake insurance. In addition, the long-term effects of climate change on general economic
conditions and the biopharmaceutical industry in particular are unclear, and may heighten or intensify existing risk of natural disasters.
If an earthquake, wildfire, other natural disaster, power outage or other event occurred that prevented us from using all or a significant
portion of our headquarters, that damaged critical infrastructure or that otherwise disrupted operations, it may be difficult or, in
certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity
plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as
a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on
our business.
Our
employees, directors, and potential future principal investigators, CROs and consultants may engage in misconduct or other improper activities,
including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk
of fraud or other misconduct by our employees, directors, and potential future principal investigators, consultants and commercial partners.
Misconduct by these parties could include intentional failures to comply with the regulations of FDA and non-U.S. regulators, provide
accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States
and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing
and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct,
kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve
the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious
harm to our reputation. We have adopted a code of ethics, but it is not always possible to identify and deter employee or director misconduct,
and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights,
those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.